The Real Estate Settlement Procedures Act (“RESPA”) implemented through Reg X [12 CFR 1024] requires that a Bank provide borrowers with disclosures at various times in the residential real estate transaction process. In addition to the TILA-RESPA Integrated Disclosures for covered transactions, disclosures outline lender servicing and escrow account practices and describe business relationships between settlement service providers. For a comprehensive explanation of the regulations go to http://www.hud.gov/offices/hsg/rmra/res/respa_hm.cfm
When a potential borrower applies for a loan on a purchase transaction, TILA-RESPA requires a Bank to provide the potential borrower with a Home Loan Toolkit (an information booklet entitled “Your Home Loan Toolkit: A Step-by-Step Guide”) published by the Consumer Finance Protection Bureau.
For loans not covered by the TILA-RESPA Integrated Disclosures (i.e., home equity lines of credit, reverse mortgages and chattel dwelling loans such as loans secured by a mobile home or a dwelling, such as a house boat, not attached to real property) the following apply:
•The borrower must receive a Special Information Booklet no later than three business days after the application is received.
•The borrower must receive a Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use a particular settlement provider, then the lender must disclose this requirement on the GFE.
•HUD-1 Settlement Statement. All of the charges imposed on borrowers and sellers in connection with the real estate settlement must be disclosed and presented to the buyer at the closing – or one day prior to the closing.
RESPA also outlines certain prohibited practices by those involved in the real estate settlement.